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Affinity Water’s credit rating will remain stable after it achieved “enhanced status” as part of its 2014 price review (PR14).
Ratings agency Moody’s said the decision from Ofwat indicates that the regulator views Affinity’s business plan as among the most efficient in the industry.
In addition, it said Affinity’s fast tracking provided early visibility about its allowed total expenditure in the AMP6 regulatory period.
Affinity, along with South West Water, were the first companies to have their draft determinations having accepted Ofwat’s guidance on risk and reward, which included a weighted average cost of capital (Wacc) of 3.85 per cent.
Ofwat also accepted Affinity’s proposals to cut customers’ bills by an average of 11 per cent before inflation, with investment of approximately £1.2 billion over the period.
According to Moody’s, the water company has a stable cash flow generation and is demonstrating “strong operational performance in the current regulatory period despite challenging efficiency targets”.
The ratings agency added that the outlook for all credit ratings remains stable.
Despite this the Moody’s said Affinity Water’s credit quality was constrained because of its highly leveraged structure.
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